Finding the Right Commercial Mortgages Helps You to Meet Your Financing Needs
Posted: Nov 08, 2017
When you apply for a commercial loan, you may work with direct commercial mortgage lenders or choose to approach a mortgage broker. A broker is an intermediary who brings together a lender and a borrower. It is important to understand that brokers are not authorized to provide the final loan approval, but are there to consult you on your options.
Brokers are not authorized to disburse money. Based on the requirement of the loan, mortgage brokers in the USA generally originate and process different types of commercial loans. They charge brokerage representation fees in exchange for originating and processing commercial loans from the borrowers. The borrowers can visit a mortgage broker website to know more about the brokerage fees, benefits, advantages, and other financial/mortgage services rendered by them.
A loan that is used to purchase or renovate an owner-occupied or tenant occupied commercial property is known as commercial real estate loan. Commercial properties such as mixed-use buildings, retail centers and office buildings can be purchased or renovated using a commercial real estate mortgage. Some of the common types of loans available to the commercial investors in the USA are: permanent loans, bridge loans, commercial construction loans, take out loans, conduit loans, SBA loans, SBA 7(a) loans, and fix & flip loans.
Types of commercial loans in the USA
Permanent loans are availed from traditional lending agencies such as banks and other conventional lenders. The loan must have some amortization and a term of at least five years, to qualify for a permanent loan. As compared to bridge loans, the rate of interest is low in permanent loans. Permanent loans have long and rigid documentation and approval procedures.
People who can’t qualify for permanent loans from reliable lenders such as bank can apply for bridge loan to meet their short-term financing needs. It’s a short-term loan that is typically taken by the commercial investor for a short period of time, ranging from 6 months to 3 years pending the arrangement of larger or longer-term financing. Bridge loans are typically more expensive than conventional financing, to compensate for the additional risk. It has a higher rate of interest but easy approval process.
Commercial construction loans
Commercial construction loans are used by the investors in the USA for the purpose of building a commercial property. In order to make sure they are only used in the construction of the new building, the loan proceeds are controlled by the lender.
It is a large permanent loan on a standard type of commercial property that is underwritten to secondary market guidelines and has a 12-36 month soft pre-pay. Interest rates for conduit loans are lower compared to permanent loans.
Fix and flip loans
It’s a renovation loan that is similar to construction loans. To carry out renovation on a commercial property for quick sale, fix and flip loans are used by the borrowers and real estate investors in the USA.
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